Optimal Interest Rates in Cooperative Banks with Non-member Customers

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Catturani, Ivana and Venkatachalam, Ragupathy. 2014. Optimal Interest Rates in Cooperative Banks with Non-member Customers. Journal of Entrepreneurial and Organizational Diversity, 3(1), pp. 181-200. ISSN 2281-8642 [Article]

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Abstract or Description

Previous attempts to understand the functioning of cooperative banks have often considered them as being similar to credit unions. However, we argue that credit unions are only a subset of co-operative banks and the models used to describe their behavior cannot be generalize to all co-operative banks. There is an important factor that characterizes the behavior and outcomes of co-operative banks and that do not apply to credit unions: the role of non-members and their contribution to the over-all welfare of members through deposits and interest earnings for the bank. In this paper, we move from a model developed to describe the pricing policy on interest rates of credit unions and we propose a more general model by incorporating non-member depositors and borrowers, who play a key role in the interest rate determination of co-operative banks.

Item Type:

Article

Identification Number (DOI):

https://doi.org/10.5947/jeod.2014.009